TaxTMI 
TaxTMI 
2012 (11) TMI 59
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter before CIT (A). CIT (A) granted partial relief to assessee. Aggrieved by the order of CIT (A) both the assessee and the Revenue are now in appeal before us. ITA No.504/AHD/2008 (Assessee's appeal) 3. Ground No.1 and 5 are not pressed and therefore not adjudicated. Ground No.6 is general in nature and therefore not adjudicated. 4. Ground No.2 is with respect to disallowance u/s.14A. A.O. noticed that assessee had claimed exempt income u/s. 10 of Rs. 5,26,02,435/-. On verification of the details of Bank expenses, the A.O. noticed that the assessee has paid Rs. 2,79,851/- as interest. He was of the view that the element of administrative expenses such as salary of executives, staff, office rent and amenities etc. for earning exempt income cannot be ruled out. Considering the volume of share transactions he disallowed the expenditure of 1.15% (1.5% of Rs. 5,26,02,435/-) i.e. Rs.7,89,000/-. He also disallowed interest of Rs. 2,79,851/-. Thus he made aggregate disallowance u/s.14A of Rs.10,68,851/-. 5. Aggrieved by the order of A.O. assessee preferred appeal before the CIT (A). 6. CIT (A), relying on the decision of ITAT Chennai Bench in the case of Southern Petro Chem....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 122, the Hon'ble High Court has held the expression "expenditure incurred" refers to actual expenditure and not to some imagined expenditure but the "actual" expenditure that is in contemplation u/s. 14A(1) is the "actual" expenditure in relation to or in connection with or pertaining to exempt income. The corollary to this is that if no expenditure is incurred in relation to exempt income, no disallowance can be made u/s. 14A. 11. We find that the A.O. has estimated the expenses at 1.5% of the exempted income. He has not given any finding with respect to the expenditure incurred on administrative-head by the assessee. The assessee has submitted that it has incurred no expenditure. In view of the totality of facts and relying on the decision of Hon'ble Delhi High Court we are of the view that no disallowance with respect to administrative expenses can be made in the present case. We thus delete the disallowance. 12. The third ground of the assessee is with respect to the inter-corporate deposit (ICD) write off of Rs.75 lakhs. 13. The assessee had placed inter-corporate deposit (ICD) of Rs.1 crore with M/s. M.S. Shoes Ltd. in F.Y. 1993-94. The said company is stated to hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inter-corporate deposit is a property and hence can be treated as capital asset. He also relied on the decision of Gujarat High Court in the case of CIT vs. Minor Bababhai alias Lavkumar Kantilal (1981) 128 ITR 12 (Guj.) and in the case of CIT vs. East India Charitable Trust (1994) 206 ITR 152 (Cal.). It was thus submitted by the Ld. A.R. that since ICD is a capital asset and the assigning of the debt is a transfer, the loss arising out of such transfer should be allowed as capital loss. 18. The Ld. D.R. on the other hand, submitted that case-laws relied upon by the assessee are distinguishable on facts. He pointed out that in the case of CIT vs. Minor Bababhai alias Lavkumar Kantilal (supra), it was not a case of transfer and therefore, the facts are different and cannot be applied in the assessee's case. In the case of CIT vs. East India Charitable Trust (supra) the facts were different as in that case the trust had some capital gain on sale of shares and utilized the sale proceeds inter alia for making fixed deposits with some banks and public sector undertakings. In these circumstances it was held that the investment or deposit was an asset in that case, it was not case o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Collector it was also stated that if the assessee pays Rs.20 lakhs as sponsorship, the name of the assessee will be exhibited at appropriate place. Pursuant to the letter of Collector, the assessee made payment and claimed it as expenditure. The A.O. was of the view that the expenditure of Rs.20 lakhs was not a business expenditure u/s. 37(1) of the Act. He accordingly disallowed the entire expenditure. Aggrieved by the order of A.O., assessee carried the matter before CIT (A). 22. Before CIT (A), the assessee submitted that the expenditure was allowable u/s. 37(1) as it was incurred for the purpose of its business. It was further submitted that by incurring of expenditure the assessee has not acquired any capital asset. The assessee also placed reliance on the decision of Hon'ble Supreme Court in the case of Godhra Electricity Co., 225 ITR 746, CIT vs. Madras Refineries Ltd., 266 ITR 170 and Addl. CIT vs. Kubersigh Bhagwadas (118 ITR 379) (MP). CIT (A) after considering the submissions of assessee, deleted the addition by holding as under:- "4.2. I have considered the facts of the case and the submissions of the appellant along with the case laws as relied upon. I am inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not as if the payment in the present case had been made as an illegal gratification. There is no law which prohibits the making of such a donation. The mere fact that making of a donation for a charitable or public cause or in public interest results in the Government giving patronage or benefit can be no ground to deny the assessee a deduction of that amount under section 37(1) of the Act when such payment had been made for the purpose of the assessee's business." 27. In the present case, the assessee has paid Rs.20 lakhs for construction of Mehsul Bhavan but the assessee is not the owner of the Asset and has also not acquired any capital asset. The expenses have been incurred for the purpose of business. The Ld. D.R. could not controvert the findings of CIT (A) by bringing any material to the contrary on record. In view of these facts and respectfully following the decision of Hon'ble Apex Court in the case of ACIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd., we are of the view that no interference is called to the order of CIT (A) and we thus dismiss this ground of Revenue. 28. Second ground is with respect to the deletion of disallowance of write off of obsolete me....